Test your basic knowledge |

AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






2. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






3. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






4. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






5. Demand for a resource like labor is derived from the demand for the goods produced by the resource






6. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






7. A firm that has market power in the factor market (a wage-setter)






8. The output where ATC is minimized and economic profit is zero






9. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






10. TR = P * Qd






11. Es = (%dQs) / (%dPrice)






12. Ed > 1 - meaning consumers are price sensitive






13. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






14. The rational decision maker chooses an action if MB = MC






15. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






16. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






17. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






18. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






19. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






20. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






21. The change in quantity demanded resulting from a change in the price of one good relative to other goods






22. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






23. Ed < 1






24. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






25. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






26. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






27. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






28. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






29. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






30. Exists if a producer can produce a good at lower opportunity cost than all other producers






31. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






32. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






33. Product demand - productivity - prices of other resources - and complementary resources






34. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






35. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






36. The imbalance between limited productive resources and unlimited human wants






37. The total quantity - or total output of a good produced at each quantity of labor employed






38. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






39. Entry of new firms shifts the cost curves for all firms downward






40. Total product divided by labor employed. APL = TPL/L






41. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






42. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






43. The difference between total revenue and total explicit and implicit costs






44. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






45. The marginal utility from consumption of more and more of that item falls over time






46. The lost net benefit to society caused by a movement away from the competitive market equilibrium






47. Two goods are consumer substitutes if they provide essentially the same utility to consumers






48. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






49. Ed = 0 - no response to price change






50. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand